WHITE PAPER. Top 5 HR Compliance Concerns for Startups

Transcription

1 WHITE PAPER Top 5 HR Compliance Concerns for Startups

2 As the economic horizon continues to shift, entrepreneurs in startup situations may wind up being so focused on core business issues that they overlook one of their most potentially serious and costly issues human resource compliance. Unlike their large-company counterparts, startups lack the time and resources to build infrastructure and processes that are beyond core business objectives. But if the entreprenerus that launch startups are focused solely on growth and product, how do they know what issues to look for in order to protect the company? Let s look at the Top 5 HR Compliance Issues that they may face. 1. Unaddressed exposure to workplace litigation According to the Equal Employment Opportunity Commission (EEOC), race and sexual discrimination are the most prevalent forms of workplace discrimination. But few businesses provide training regarding racial and sexual harassment and this can open the door to wrongful termination when an employee leaves their job. Yet despite the possibility of being sued, startup owners are not addressing the problem head on. For example, many startups neglect to provide employment discrimination and/or sexual harassment training. Employee turnover contributes to employer liability by creating potential wrongful termination cases. Studies show that a company s legal costs in a wrongful termination lawsuit can run up to $85,000, and that winning plaintiffs receive judgments averaging $500, Not following current benefit regulations and laws The cost of compliance with benefits regulations is often a heavier burden for small startups, primarily because the associated overhead expense is spread over a smaller workforce. It s entirely logical to assume that many startups spend more per employee on federal regulatory compliance than large companies. Poor management of personnel-related tasks could make compliance even more costly. For the startup owner who offers retirement, health, and welfare benefits, keeping up with all the new regulations and changing laws can be daunting. The required tests must be conducted, plan provisions must be properly applied, required notices and documents must be provided to employees, and all required government filings must be completed. Plus there s the alphabet soup of HIPAA, COBRA, FMLA, and the rest to consider. 2

3 3. Multiple HR policies and procedures to follow with no qualified guidance Often the human resource department at a startup company consists of one person, if that. And typically that individual wears many hats. This HR generalist may be responsible for compensation and benefits, HR management, labor relations, legal issues, staffing, HRIS, training, and much more. Besides keeping up with all of these tasks, the job of conducting comprehensive independent research often falls into the HR generalist s nights and weekends, which can lead to costly mistakes due to fatigue. While a typical HR generalist may know a bit about everything, rock solid HR guidance is crucial given the constant presence and oversight of entities such as the Internal Revenue Service (IRS), the Department of Labor (DOL), or the EEOC. The old adage ignorance of the law is no defense certainly applies when a company is faced with an audit, an investigation by a government agency, or even litigation. This is particularly true when areas of concern include everything from compensation and benefits to staffing and workers compensation issues. An HR generalist who makes the wrong decision about a crucial employee issue even something as simple as asking the wrong question in an interview can result in significant consequences. 4. Paperwork administration results in substantial errors With every new hire comes a mountain of paperwork. If a company doesn t have access to online services and must deal with hard copies, errors can multiply. When an employee elects their benefits, payroll must ensure that the adequate deductions are made. When an employee undergoes a life status change and alters his or her benefits selections, benefits and payroll must be adjusted accordingly, and within the legally required timeframe. All of these administrative processes tend to live in different parts of the organization, and yet they re utterly dependent upon one another. At each step, when information is transferred from one HR process to another, there is a chance of error. Multiply this possibility by the number of employees and the reams of paperwork and that possibility starts looking like a probability. When one area fails, the whole process comes to a halt. When mistakes occur, it may cause employees to focus on the errors rather than appreciating the benefits that HR delivers to them. Many employees don t realize how much money a company spends on employee benefits. The costs are staggering and can easily reach between 5 and 10 percent of an employee s salary, depending on coverage options. So instead of saying how great it is to get topquality benefits and flexible spending accounts, employees are complaining that the wrong deductions were taken out of their paychecks. This type of negative discourse can spread rapidly particularly in a startup situation. 3

4 5. Lack of HR function coordination In order for the correct amount of deductions for benefits to be taken out of an employee s paycheck, accurate information must flow to and from payroll. Payroll data and benefits recordkeeping need to work in sync. Otherwise, payroll deductions can be wrong. When that happens, employees notice the errors and valuable time is wasted to implement corrections. If different vendors are employed for the payroll and benefits recordkeeping function, the startups owner is the one who must ensure that everything is coordinated and running smoothly. This entails fielding calls back and forth from the vendors, while trying to understand the technicalities of the different systems. But what about using one of the myriad payroll software products now available? Having the right software still does not address the need to integrate the payroll and benefit functions. So now, in addition to making sure the software runs correctly, owners still need to communicate and transmit the information to their benefits record keeper. In addition the payroll software must be continually upgraded. Getting help Many of these landmines can be avoided with a little careful advance planning, and most importantly, by seeking outside help. Many small businesses work with an outside HR consultant or a lawyer who specializes in employment issues. TriNet provides several HR services for smaller companies, including payroll and benefits administration, as well as assistance with many aspects of employer-related risk management and compliance. Whichever option a small business owner chooses, he or she faces the need to let qualified experts provide strategic guidance in regards to these issues. The return on investment for taking precautions against running afoul of the law is not only the prevention of costly errors, but the satisfaction and productivity of the entire workforce. 4

5 About TriNet TriNet serves as a trusted HR partner to startups, helping them to contain costs, minimize employer-related risks, relieve administrative burden, and keep focused on their core business functions. From routine employee benefits service and payroll processing to high-level human capital consulting, TriNet s PEO expertise is integrated with every facet of a client s organization. Its solutions specialize in serving fast-moving companies in fields such as technology and professional services, who recognize that top-quality employees are the most critical competitive asset. For more information, visit. Disclaimer The contents of this white paper have been prepared for educational and information purposes only. The content does not provide legal advice or legal opinions on any specific matters. Transmission of this information is not intended to create, and receipt does not constitute, a lawyer-client relationship between TriNet, the author(s), or the publishers and you. You should not act or refrain from acting on any legal matter based on the content without seeking professional counsel. Copyright 2012 TriNet. All rights reserved. All trademarks, trade names, service marks and logos referenced herein belong to their respective companies. 00T oaEBH Learn more at TriNet.com or call Ambitions Realized